While good progress has been made in South Africa to enable greater access to affordable housing opportunities for citizens, much work remains to be done to assist those trapped in the so-called ‘gap market’. Home ownership among households with incomes too low for traditional private bond financing, but too high for government-subsidised housing, is presently only 49%.

Addressing an investor conference of global private equity funder, International Housing Solutions (IHS), in Johannesburg, Nene said that despite government making good progress with a number of initiatives to enable greater access to affordable housing opportunities, much work remains to be done. The private sector can and should play a significant role in making such opportunities a reality.

The plight of the gap market was given prominence by President Jacob Zuma in his State of the Nation Address last year and again this year.

The problem for those households earning between R3 200 and R6 300 per month, forcing them into this ‘gap’, is heightened by a major lack of housing stock in this market.

Nene said the transformation of human settlements and spatial development, to create conditions for more humane and sustainable living and working environments, was a key component of government’s growth and employment-focused National Development Plan (NDP). Urgently addressing the needs of the gap market was, in turn, a central part thereof.

Sketching the ongoing fragility of the global economy and its growth prospects, to which South Africa is not immune, Nene said the country “required much faster and sustained growth to address its socio-economic challenges”.

Government’s plan to improve growth in gross domestic product, to create jobs and eradicate poverty is captured in the NDP, of which the transformation of human settlements is a key element, he said.

“Although our budget forecasts may require some downward revision, we expect that a rebound in private sector investment and the improved capacity from higher government spending on infrastructure will raise growth levels from 2014 onward.”

According to the deputy minister, the 2011 Census showed that 78.4% of South Africa’s 14.5-million households lived in formal housing.

The government-subsidised housing programme has provided housing opportunities to over 20% of the population. The home ownership rate, confirmed by the census, is 53%.

The census further confirmed that the lowest home ownership rates are among households that have no income (48%) and among households with a monthly income of between R3 200 and R6 300 (49%), Nene said.

While government is addressing the plight of the poorest segment, he referred to the various initiatives launched by government to enable more households in the gap market segment to obtain houses.

One of these is the Finance Linked Individual Subsidy Programme of the department of human settlements, announced by President Zuma last year. In his most recent State of the Nation Address, Zuma reported that in 2012 provincial departments committed R126m of the Human Settlements Development Grant for this programme.

Some R70m has already gone to 12 registered projects, while a further eight gap housing projects are currently under way.

In his recent budget speech, finance minister Pravin Gordhan reiterated that South Africa is a rapidly urbanising society with 62% of its people already living in cities and towns, and which needs to meet the urgent demand for housing, among other things. Funding for improving human settlements was to be increased from R26.2-billion to R30.5-billion over the next three years.

Other initiatives to support the supply of affordable housing listed by Nene include the Urban Settlements Development Grant introduced to metropolitan municipalities in 2011 and the Cities Support Programme and tax incentives to developers building houses with a sale value of up to R300 000.

To overcome the resistance among banks to grant loans to this segment, the national treasury and the department of human settlements are collaborating to find credit-enhancement mechanisms that would assist households.

Referring to the achievements of IHS in South Africa in developing the affordable housing market, Nene said: “This is the kind of commitment we want to see from the private sector.”

He warned against the “many naysayers”. It is “easy to get caught up in the immediate negative headlines and environment” and avoid investing in South Africa. Yet, South Africa remained a “worthy and attractive investment destination”, he said.

Adding her voice to Nene’s, Soula Proxenos, managing partner at IHS, said private equity investments were key to Africa, as public markets were not well-developed.

“Private equity is an ideal way to build up capacity, capitalise young business and drive large entities," she said.